TMI Blog1953 (3) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... of books, exercise books, diaries, etc. The premises in which the assessee carries on this business were requisitioned by the Collector of Bombay by his order dated the 11th of September, 1943, under rule 75-A(i) of the Defence of India Rules. The assessee filed a claim before the requisitioning authorities claiming a sum of ₹ 8,10,300 as compensation. A sum of ₹ 93,106 was ultimately awarded for compensation to the assessee. The Income-tax Officer treated a sum of ₹ 61,129 out of this sum as a revenue receipt and in this particular reference we are only concerned with an item of ₹ 57,435 and the only question that we have to consider is whether this sum of ₹ 57,435 received by the assessee as compensation for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of the Collector's taking possession of the land by reason of the acquisition injuriously affecting his other property, moveable or immoveable, in any other manner, or his earnings. Therefore if by reason of the premises of the assessee being requisitioned his business was prejudicially or injuriously affected or even if his earnings were prejudicially or injuriously affected the assessee would be entitled to compensation for the damages so caused, and it seems to us clear that if the assessee can successfully bring his case under this head, the compensation cannot constitute a revenue receipt. The department has attempted to tax this amount of compensation as income falling under Section 10 of the Income-tax Act, and we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of which ran the lines of the Caledonian Railway. Caledonian Railway acquired these fields and compensation was paid for it to the assessee company. The assessee company for the purposes of excess profits tax treated the compensation received as profits in order to compare their profits with the profits of the subsequent year, and the question that arose before the Court of Appeal was whether the assessees were entitled to treat the compensation as profits. It is in this connection that Lord Buckmaster at page 463 made the following observations:- The argument in support of its inclusion can only be well founded if the sum be regarded as profits, or a sum in the nature of profits, earned in the course of their trade or business. I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived at by means of the application of that test. Applying this very significant observation to the facts of the present case, there is no relation whatever between the measure of damages adopted and the quality of the payment actually made to the assessee. Whatever the test that might be applied, we are more concerned with the quality of the payment rather than the nature of the test applied; and Lord Wrenbury at page 466 considers the question of the profits of the business being capitalised and compares them to an annuity. That would be another difficulty in the way of Sir Nusserwanji. Even assuming that the compensation paid constitutes loss of profits, what has been done by the requisitioning authorities is to capitalise the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment hired them and had the use of them and the Government paid for the hire and therefore it was on those facts that the Court of Appeal held that the amount received was a revenue receipt and not a capital receipt, and at page 1178 Lord Hanworth M.R., makes the position clear: Their business (i.e., the business of the assessee) is to make use of the vessels that they own, to hire out the vessels to characters, and to make profits from the earnings of the ships. If one treats the ships as being capable of being hired out under freight for every day of the year, it is then, I think, plain that if you hold up a ship for 15 days as in the case of the 'Charlus' or 19 days as in the case of the 'Webburn', you have prev ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
